Correlation Between Federated Ultrashort and Versatile Bond

Can any of the company-specific risk be diversified away by investing in both Federated Ultrashort and Versatile Bond at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Federated Ultrashort and Versatile Bond into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Federated Ultrashort Bond and Versatile Bond Portfolio, you can compare the effects of market volatilities on Federated Ultrashort and Versatile Bond and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Federated Ultrashort with a short position of Versatile Bond. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federated Ultrashort and Versatile Bond.

Diversification Opportunities for Federated Ultrashort and Versatile Bond

0.62

Correlation Coefficient

Federated Ultrashort  Versatile Bond

Poor diversification

The 3 months correlation between FEDERATED and Versatile is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Federated Ultrashort Bond and Versatile Bond Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Versatile Bond Portfolio and Federated Ultrashort is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Federated Ultrashort Bond are associated (or correlated) with Versatile Bond. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Versatile Bond Portfolio has no effect on the direction of Federated Ultrashort i.e., Federated Ultrashort and Versatile Bond go up and down completely randomly.

Pair Corralation between Federated Ultrashort and Versatile Bond

Assuming the 90 days horizon Federated Ultrashort Bond is expected to generate 0.97 times more return on investment than Versatile Bond. However, Federated Ultrashort Bond is 1.04 times less risky than Versatile Bond. It trades about 0.18 of its potential returns per unit of risk. Versatile Bond Portfolio is currently generating about 0.01 per unit of risk. If you would invest  923.00  in Federated Ultrashort Bond on August 31, 2024 and sell it today you would earn a total of  4.00  from holding Federated Ultrashort Bond or generate 0.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Federated Ultrashort Bond  vs.  Versatile Bond Portfolio

Federated Ultrashort Bond

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Federated Ultrashort Bond are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Federated Ultrashort is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Versatile Bond Portfolio

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Versatile Bond Portfolio are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental drivers, Versatile Bond is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Federated Ultrashort and Versatile Bond

The main advantage of trading using opposite Federated Ultrashort and Versatile Bond positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federated Ultrashort position performs unexpectedly, Versatile Bond can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Versatile Bond will offset losses from the drop in Versatile Bond's long position.

The idea behind Federated Ultrashort Bond and Versatile Bond Portfolio pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.